The IRS has announced a decrease in the business standard mileage rate from 54 cents per mile to 53.5 cents per mile beginning January 1, 2017. Other standard mileage rates also change.
Business standard mileage rate decreases for 2017
There are two ways to deduct vehicle expenses for business purposes – actual expenses (plus depreciation), or the standard mileage deduction. The mileage deduction replaces all of the following: lease payments or depreciation, maintenance, repairs, tires, gas, oil, insurance, and registration fees. If you use the standard mileage rate, you can still claim separate deductions for tolls and parking related to business driving. But, you can’t take both the standard mileage deduction and, for example, actual costs of gasoline.
This isn’t just for company-owned vehicles. Many employers reimburse their employees for use of the employees’ own vehicle for business purposes. The easiest way to make the reimbursement is on a mileage basis. The standard mileage rate is the maximum that employers can reimburse employees under an accountable plan. Reimbursement at a higher rate could result in taxable wages to the employee. Note that employees must keep adequate records to properly be reimbursed. The IRS requires employees to track the time, place, business purpose, and mileage of each business trip to be reimbursed.
The standard mileage rate can be used whether the vehicle is leased or owned. But, it cannot be used on a purchased vehicle if:
- the vehicle was previously depreciated using a method other than straight-line for its estimated useful life (i.e. typical MACRS depreciation);
- bonus depreciation was taken on the vehicle; or
- a Section 179 deduction was claimed for the vehicle.
The IRS monitors prices on gasoline and other vehicle expenses and adjusts the standard rate accordingly. The rate is usually adjusted annually, effective January 1. In some years with rapid price changes, an additional mid-year adjustment can be made as well.
New rate for 2017
The standard mileage rate for 2017 is 53.5 cents per mile. This is a decrease of 0.5 cents per mile from 2016 rate of 54 cents per mile. The new rate is effective January 1, 2017.
Other standard mileage rates
Individuals can take a deduction for use of their vehicle to get medical care. Because there’s a high floor before you can deduct medical expenses (7.5% or 10% of your adjusted gross income, depending on your age and the tax year) most people don’t get a tax benefit from medical care mileage. If you can use it, the rate for 2016 was 19 cents per mile. Beginning January 1, 2017 it’s reduced to 17 cents per mile.
Qualified moving expenses
If you make a move that qualifies for the moving expense deduction, the rate for 2016 was 19 cents per mile. Beginning January 1, 2017 it’s reduced to 17 cents per mile.
You can also take a charitable deduction if you use your vehicle for qualified charitable use. This rate is not indexed for inflation, so it doesn’t change. The standard mileage rate for charitable use is 14 cents per mile.
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